Malaysian casino giant Genting has sold its stake in the Star Entertainment Group, according to the Australian Financial Review.
Genting acquired 9.7 per cent in Star Entertainment, then known as Echo Entertainment, in early 2012, shortly after it was demerged from Tabcorp.
The move came a week after Star warned of “soft conditions” in the Australian gaming market following the arrest of 19 Crown Resorts for marketing Crown’s services to China.
Like Crown, Star was forced to rein in its VIP marketing in the region in the wake of the scandal, concentrating instead on “the core business,” which means cutting costs and driving more local traffic to its Star Sydney, Star Gold Coast and Treasury Casino & Hotel Brisbane properties.
This outlook has perhaps made it less attractive to the internationally minded Genting.
Star in the Crown?
Genting acquired its stake in Echo shortly after James Packer’s Crown Resorts bagged a 10 per cent holding in a hostile raid. Crown sold out the following year, in 2013. But curiously enough, with all this talk of soft conditions and saving money, it might be time to rekindle that relationship.
According to Citi analyst Rohan Sundram this week, in the current climate, a consolidation of Crown and Star might just be a very smart move.
Sundram has crunched the numbers of a hypothetical merger between Australia’s two top casino companies and concluded that a deal could result in $110 million in cost-saving synergies annually. The analyst cited VIP commissions and corporate overheads as the two major factors in its calculations.
“Through its expanded scale across Australia, we estimate that a combined Crown and Star would increase its share to around 86 per cent of domestic mass market revenue and 90 per cent of VIP revenue amongst the major casino operators,” Sundram suggested.
Could it Ever Happen?
But wouldn’t this hypothetical tie-up incur the disapproval of the competitions regular? Not according to Sundram. AFR reports he argues that “mass market customers would not be disadvantaged in any meaningful way from Crown’s ownership of both The Star Sydney and Crown Sydney, given the potential for customer segmentation between the two properties.
“We believe the combined group could potentially offer more compelling loyalty reward offerings to customers across their various properties nationally,” he added.
Who knows? If the Australian Competitions Tribunal can approve the merger of the nation’s two biggest, semi-monopolized gambling powerhouses, Tabcorp and Tatts, on the basis that they will (and we paraphrase) “earn more money,” then anything’s possible.